Occupy the IRS? TaxKilla Shows You How to Bend the Tax Code

Given that protests against "taxation without representation" catalyzed the founding of our country, it's appropriate that each April, resistance to taxes in general becomes America's national hobby. Some take that resistance to the extreme by encouraging the broad use of tax loopholes and legal, but iffy, ways to reduce what you pay to the IRS.

The latest player to debut in that crowd: a website called taxKilla.org, which resembles the hybrid offspring of the Occupy movement and the anti-tax wing of the Tea Party.

Though taxKilla may be among the most pronounced examples of this cheat-the-system sentiment -- at least in its heavily-charged rhetoric -- it's not alone. There is a widespread belief that the empowered rich lobby for unfair tax breaks and bend the rules, gaming the tax system to their benefit at the expense of the rest of us -- and that the rest of us should push back. What taxKilla recommends is not technically cheating -- instead, it suggests ways for average Americans to use some of the same loopholes the rich and powerful do to level the playing field, cut corners, increase their deductions, and avoid or beat an audit.

So Who Are These taxKillas?

According to Business Insider, two ex-Wall Streeters formed the site in January 2012, in part to strengthen their ties to the Occupy movement. Co-founder Jen Powers, a Columbia grad who worked in finance in the 1980s before decamping to social work, has said taxKilla operates under the motto "Occupy The IRS." Powers says her co-founder is Fred Buddemeyer, but failed to elaborate on his bio, saying only that a LinkedIn page that lists him as a graduate of Dartmouth's Tuck School of Business was "created as an SEO test." (That page, and another for him, have since been removed from LinkedIn.) Buddemeyer was not made available for comment.

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The site uses as its Twitter avatar a picture of Thomas Jefferson, who pushed through the repeal of a host of taxes on Americans during his presidency. And the taxKillas point to tax rebellion as an important touchstone throughout history.

"Tax protests have shaped history long before these groups," Buddemeyer wrote, (and conveyed through Powers). "When the people refused Henry the VIII's levies, he couldn't make his mark by invading France so he found inspiration from love instead of war."

"it is a joke that people surrender half their labors to a gang of thugs, however that they do this without question is rather sad," Buddemeyer wrote.

Judging from the site's ragged visual style, Guy Fawkes imagery and e.e. cummings-esque disregard for punctuation and capitalization -- perhaps in a subtle dig at 'capital'? -- taxKilla is trying to dovetail with the grassroots vibe of the Occupy movement. Even the "https" is stricken in red from the URL in renegade fashion. One could suggest that it's the diabolic counterpoint to the Singing Tax Lady's angelic tax tips.
The Rebellion Itself -- Not All That Revolutionary

As for the information itself, it's not all that innovative or revolutionary. For example, the site explains to wannabe tax rebels how to skirt taxes by filing Schedule C and taking deductions like a business entity.

That's not exactly accounting ingenuity: CPAs know that loads of people do this already to create more robust tax refunds.

Along with its beat-the-system advice, taxKilla helps you get started in executing it: Once a person signs up, he is provided with information on which forms to fill out to get a business entity deduction: 1040, Schedule C and Form 4562. The site lets you know where to file for free and explains the purpose of each line on your tax form.

Among the other wise bits of advice it offers for those who hope to push the edge of the envelope: tips for avoiding an audit.

Many celebrities have gotten smacked down for failing to paying taxes. Wesley Snipes actually landed in prison for his $17 million unpaid tax bill, while Nicolas Cage owed a seven-figure amount to the IRS. A host of others, including Lindsay Lohan, Pamela Anderson, and Christina Ricci, have faced liens or tax bills for more modest -- yet still sizable -- sums.

The two main reasons for us ordinary folks getting stuck with a big tax bill are that your paycheck withholding needs changing or that you have outside income that comes without having taxes withheld. In either case, even if you can't afford to pay when the bill comes due, ignoring the problem will eventually land you in an even bigger heap of trouble. Instead, take advantage of IRS programs that let you make affordable installment payments over time.

Part of what put Wesley Snipes behind bars was his conviction on three counts of failing to file tax returns by their filing date. In part, he relied on a bogus theory that all income taxes are unconstitutional as justification for his actions.

But a much more common problem many people run into is that they can't afford to pay their tax bill right away. The mistake they often make is to assume that they shouldn't file a return at all if they can't pay. In reality, the penalties for not filing your taxes are much more severe than if you file but can't payyour taxes all at once. So even if you don't have the money to send with your return, go ahead and file. It'll save you a ton of money -- and possibly jail time -- in the long run.

AccountingWEB recently took a look at some of the great swag that celebrities received at the Academy Awards. With sponsors handing out goodies including everything from jewelry to exotic safaris, the gift packages added up to as much as $75,000 in value. But the recipients have to report it all as taxable income.

You may never be so lucky, but even more modest prizes often get reported to the IRS. If you get a Form 1099 reporting the value of something you received as a prize or award, notincluding it on your tax form could trigger a red flag at the IRS.

One allegation that Nicolas Cage raised regarding his tax problems was that his business manager mishandled his funds and caused big losses that destroyed his finances. Similarly, Martin Scorsese and Al Pacino both blamed convicted adviser Kenneth Starr for their tax woes. Starr went to prison for fraud and theft from clients.

Still, no matter where you go or how much you spend for tax preparation, youbear final responsibility for making sure your tax returns are accurate. Reputable accountants will reimburse you for any penalties and interest that result from mistakes they make, but don't count on them. Instead, make sure you understand the positions your tax pro takes so that you can defend them if a question arises.

As you look at the hijinks of your favorite celebrities, be sure not to make the same tax mistakes they made. With a little common sense and some planning, you can learn from celebrity mishaps the easy way.